Speculators see higher per
share price for Harrah’s

Jan 30, 2007 4:30 AM

First it was the sudden interest in "call" options that got investors wondering whether something was going on with the shares of Harrah’s Entertainment Inc. (HET).

Since the announcement that Harrah’s board had agreed to accept a $90 per shareabuyout offer from the private equity firms Apollo Management and Texas Pacific Group, Harrah’s shares traded in the $82 level, primarily because it was expected that the buyout would take at least a year since the private equity group would have a lot of work to do in order to be licensed in the many jurisdictions in which Harrah’s had gaming facilities.

But last week, option traders noted a sudden, and surprising, increase in May calls at the $85 level. Those buying the calls are given the right to buy the stock at $85 a share. Reportedly, there were nearly four times as many call options purchased by the close of business on Friday than normal.

Sensing that the call option spur signaled another bid might be made for the company — possibly one that would exceed the existing $90 per share bid — traders began heavily buying the Harrah’s shares, pushing the price to $85.54.

Meanwhile, there was no news out of Harrah’s headquarters, thus leaving investors to speculate as to the reason behind the sudden increase in call option volume.

But out of the blue came an announcement from Goldman Sachs Group Inc. that is had temporarily suspended its investment rating on Harrah’s to comply with corporate policy that requires it to drop coverage when acting as adviser in a deal involving a covered company.

Yes, Goldman Sachs said, it was now advising on a merger or a strategic transaction involving the casino operator.

Goldman Sachs was not one of the original brokerages involved in the Harrah’s/Apollo Management and Texas Pacific Group buyout but it would not identify the role it was currently playing.

Without further information on Monday, Harrah’s shares changed hands moderately with the price falling a bit to $84.94, down $0.60 for the day.

Another opening

After seeing the success being enjoyed by the three "racinos" currently operating in Pennsylvania, MTR Gaming Group (MNTG) has decided to increase its staff for the grand opening of Presque Isle Downs in Erie on Feb. 15.

Management indicated it initially planned to hire 550 workers for the football-field long slots floor at the new harness racetrack but has decided to increase the opening staff to 650.

In addition to the slot machine activity, the company will have lounges and restaurants open, as well.

Huge openings have been reported by Mohegan Sun Pocono Downs, Harrah’s Chester Harness Track and Philadelphia Park thoroughbred track.

A company spokesman said that another 200 to 300 people will be hired in September when live horseracing begins.

Macau bound

Richard Branson, who at one time planned to have his Virgin Group Ltd. locate a casino in Las Vegas, apparently has scrapped those plans in order to build a bigger and better facility in Macau.

Branson announced last week that he is very close to acquiring a prime 50-acre site in Macau on which he planned to build a $3 billion complex that would include three hotels and a casino. He said his group is targeting an opening date of 2010 for his development.

Macau, the former Portuguese enclave, has been booming since the government busted up a casino monopoly operated by mogul Stanley Ho and granted licenses to Las Vegas Sands Corp. (LVS), Wynn Resorts Ltd. (WYNN) and the Galaxy Group.

Since the new properties were opened, Macau has become the center for Asian gaming with its gambling revenue jumping 22% to $6.95 billion in 2006.

Branson said he plans to fund his project with a mix of Virgin equity and debt financing from international banks.

Price questioned

An investment group that has union affiliations through its handling of pension funds suggested last week that the $82 per share buyout price offered by insiders for Station Casinos Inc. (STN) was to low and should be rejected.

CtW Investment Group said the offer made by members of the Fertitta family and an affiliate of Colony Capital LLC should have been at least $97 per share.

The offer is being considered by a special committee of the company’s board of directors.

Sensing further activity in the company’s shares, investors immediately boosted the trading price of the shares to $83.07 each.

CtW Investment Group also called for the resignation of Dr. Jim Nave from the special board committee saying he lacked independence because he was part of a bank merger that involved the Fertittas.

He’s back

Lee Iacocca, the auto industry icon who has been away from Las Vegas gaming since he retired from the board of directors of MGM Grand Inc. (MGG) in 1997 (prior to the acquisition of the Wynn properties) has returned as the chief spokesman for Full House Resorts Inc. (FLL).

The company last week received approval from the Nevada Gaming Commission to purchase the Stockman’s Casino in Fallon, Nev. Now that the deal has been approved, Full House Resorts expects to close on the $25.5 million purchase within a few days, according to CEO Andre Hilliou.

Iacocca owns 12% of the Full House Resorts outstanding shares and serves on the company’s board of directors. He joined the MGM Grand board in 1993 prior to the opening of the MGM Grand Hotel/Casino.

As chairman and CEO of Chrysler in the 1980’s he was credited with reviving the company by advertising that "if you can find a better car, buy it."

Here’s the money

Operators of a slots emporium at Philadelphia Park in Pennsylvania are still new to the gaming business, other than their traditional pari-mutuel racing operation, so it might take awhile for them to firm up their policies.

Especially, when it comes to paying out jackpots.

Suggesting to a customer that his $102,000 jackpot win was a mistake places a lot of egg on the operator’s face and causes the property’s other players to wonder whether the operation is on the up-and-up.

So after a high-level conference, the company decided to pay Steve Wilkinson, a retired carpenter, the $102,000 jackpot that his slot machine proclaimed he had won, only to have management tell him that it was all a mistake and that he would be awarded two buffet comps instead.

And with the $102,000 check, Wilkinson said, he also received eight food comps.